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Say Goodbye to your Standard Variable Rate (SVR)

Whilst many homeowners choose to re-mortgage as they reach the end of their current deal, many still opt for the flexibility of their lender’s Standard Variable Rate (SVR). Around 3.2 million residential mortgage accounts in the UK are on a SVR scheme – that’s a market size of around £280 billion*.

With the Base Rate at a standstill, many borrowers might just stick with the flexibility of their SVR, paying an average interest rate of 4.92%**. But with new mortgage rates at an all-time low, this does mean that many of these borrowers are missing out on the opportunity to save money, or pay off their mortgage early by re-mortgaging.

Reasons for your re-mortgage

· Put money back in your pockets – a new mortgage deal could reduce monthly payments.

· Help shorten your mortgage term – if you continue paying the same monthly payment as you are currently these overpayments could pay your mortgage off sooner.

· Switch form interest only to repayment- if you are a homeowner with an interest only mortgage, you could move a portion or all of your mortgage to repayment basis, with the added benefit of paying off some of or all of the capital.

· Free up some cash – re-mortgaging could free up equity to pay for things like home improvements.

· Peace of mind – switching to a fixed rate lets you know exactly what your monthly payments will be and help you to plan for the future.

For more help and advice on Mortgages please do not hesitate to contact us @ Hoskin Mortgages.

Interest Rates to Fix or Not To Fix

The proportion of borrowers opting for fixed rate mortgages fell in September despite the market expecting base rate to increase within the next year. The proportion of purchase borrowers choosing to fix fell 2 per cent from September 2013’s average of 94 per cent.

Re-mortgage borrowers’ preference also swung towards variable rates in September, with 89 per cent choosing to fix compared with 92 per cent 12 months earlier.

The fall in tracker rate pricing, combined with the Bank of England stating any rise in interest rates will be gradual, have prompted borrowers to choose variable over fixed rates.

It appears that interest rates will remain at historic lows for the foreseeable future, as the economy continues to recover and will probably remain low for the medium term.

The question of interest rate rises is not an ‘if’ but a ‘when’. That being said, the Bank of England has made repeated assurances that interest rate rises will be gradual, and this seems to have filtered through to some customers, who are willing to opt for variable mortgages to take advantage of lower pricing.

Once interest rate rises become a reality, the swing back to longer-term fixed rates may occur.

Lenders will price in a change in base rate well in advance of any decision to increase and therefore current best buy rates are not going to be around for long.

Now is an ideal time for existing homeowners to check whether their current mortgage is still the best deal, acting fast before interest rates rise and could prove beneficial in the long-term.

Despite the Bank’s move to reassure borrowers that rate hikes are not imminent, brokers believe other factors mean borrowers still should be considering fixed rate mortgages.

The reality is a rate rise of just 0.5 percent could see the average mortgage bill increase by £750 per year. Five-year fixed rates have already begun to rise. The five-year swap rate, used to calculate the loans, hit 1.7 percent in January up from below 1 per cent last spring. This rise is a 65 percent jump in relative rates.

Borrowers do not need to panic about rates rising right now, however they should maybe plan for when they eventually do. A five-year fixed rate in the medium term represents good value.

Borrowers should therefore look at their options and talk to an Adviser to tie down a more favorable deal.

The Bank of England is trying to convince the market of that fact and using unemployment as a guideline clearly did not work as planned. So the switch to a broader range of criteria allows for greater flexibility when it comes to adjusting rates.

Borrowers should remain cautious about eventual high mortgage repayments.

For more help and advice please donot hesitate to contact Clare Allan @HoskinMortgages.